With Sales Sluggish in 2024, Proptech Turned Inward — And Toward Zillow
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Things didn’t look great for proptech investment at the end of Q1 this year.
Data from the Center for Real Estate Technology and Innovation (CRETI) found that “investments hit just $1.491 billion in the first quarter of 2024 — a 12.4 percent year-over-year decline from $1.74 billion in Q1 2023, and a far cry from a peak of $7.44 billion tallied in the first quarter of 2022.”
By October, however, CRETI indicated things were beginning to look up: “The proptech sector demonstrated robust growth, with total funding reaching $2.2 billion across 65 deals … a slight increase from the $2.1 billion raised in October 2023, signaling sustained investor confidence and interest in real estate technology.”
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Apparently, Series B rounds were all the rage. Makes sense. For VCs, the past several years have been all about backing paths to revenue, not necessarily new ideas. Series B rounds typically catalyze growth and publicly call out companies ready for prime time, so to speak. We didn’t see a lot of new technologies gain traction and thus, fewer seed and Series A rounds.
It’s as if the slow sales market — one of the least productive in decades — allowed time for proptechs to focus on internal operations and product updates instead of scaling. And to do that, many turned to artificial intelligence.
Brokerages power up
Barcelona, Spain’s Restb.ai expanded its reach into the nation’s multiple listing services, helping speed everything from listing data input to market analytics. By September, its computer vision software was reaching 720,000 agents, close to half of NAR’s membership as of November.
“Hundreds of thousands of real estate agents and brokers can now leverage the magic of Restb.ai computer vision to create richer and more complete property listings,” Restb.ai General Manager Dominik Pogorzelski said upon reaching the milestone. “This new tech they are deploying will help sellers sell homes faster and help buyers better find the home that matches their personal needs, wants, and desires.”
The Real Brokerage was one of many prominent brands to lock into place company-wide AI initiatives. Real’s Leo came to life in 2023 but reached maturity this year. It remains crucial to the company’s remote worker model and impressive growth because of the pace at which transaction coordinators can process deals and agents can access internal information, among many other benefits.
Keller Williams calls their company AI KWIQ, and like Real’s, its intent is to be trained on company standards, agent contracts, business workings, marketing best practices and other pillars of the organization. The goal is for it to be a single source for everything KW, from inquiring about commission dispersal to requesting marketing deliverables for a new listing.
Independent brokerage Avenue 8 built Sidekick for its agents and managed to reach a high enough state of efficiency to close its brokerage business, ultimately changing industries. What was a sharply marketed independent brokerage is now an AI software company. It quickly sealed deals with OneKey MLS and SFAR.
Under Josh Team’s re-emergence as president, New York’s SERHANT. deployed what it calls S.IMPLE, an AI-driven workflow that centralizes the needs of its agents into a universal experience. It can use voice, too. A small team of advisors guides the AI as it handles a wide range of business tasks, like creating a comparative market analysis, customized newsletters, sales agreements and more.
The product, now a part of a sister company called SERHANT. Technologies, showed enough potential to court $45 million out of Camber Creek and Left Lane Capital for its ongoing development. This will be a story to watch next year.
The widespread adoption of “brokerage AI” by major players in 2024 could spell the end of the open ecosystem debate that was all the rage a few years back. To refresh, this is the debate over using a single enterprise application for all offices instead of allowing offices and franchisees to build independent tech stacks. Residential real estate is one of few industries where the majority of practitioners function without software standards.
Real Brokerage CTO Pritesh Damani said that so much software independence and intrinsic fragmentation is hard for AI tools, and therefore, the teams and companies trying to get it up and running. The AI tools struggle to advance an enterprise that’s divided among multiple CRMs, transaction tools and lead systems. It needs to be fed standardized data, according to the CTO.
“AI is extremely useless without proprietary data,” Damani said.
Property management catches up
Rental industry software providers perked up this year and tackled their increased role in American housing by coding a number of ways for property managers to be better at what they do, and for renters to be feel seen.
Landlords have been busy for a couple of years now, but likely re-energized early in the year by a February NAR report that identified a housing shortage of more than seven million homes. Thus, come September, Rent.com reported that “the median U.S. asking rent rose 0.2 percent year-over-year in October to $1,619, the sixth consecutive increase following 11 months of decreases.”
Naturally, to keep up the lack of tenant turnover, many property managers—institutional and independent— turned to artificial intelligence.
Installed were systems that treat renters like actual housing consumers, not objects to fill blocks of empty square footage. The entire category long rested on legacy accounting systems and fragmented leasing systems to loosely bind the operation and neglect the tenant experience. That has finally — mostly — changed.
The deployment of artificial intelligence is allowing for untold efficiencies and cost savings. It’s automating the collection of neglected repair costs and missed rent, fielding maintenance requests, screening rental leads, facilitating application completion and integrating directly with banking systems.
Rental software firm Colleen debuted its eponymous skip tracer, a conversational experience that can contact tenants by phone or text to inquire about late rent, overdue fees and other critical lease deadlines and milestones. The company stated in April that its Minority Report-inspired technology reduces the volume of unpaid rent by 50 percent.
Lessen’s Copilot was trained by millions of work orders to handle maintenance request intake, staff assignment and fulfillment while HappyCo’s JoyAi “automates and optimizes everything from real-time scheduling and technician-matching to 24/7 resident communications, intelligent inventory management and remote technician expertise.”
While mostly good for the industry, AI’s rapid advancement, as well as other data-driven consumer pricing trend technologies (think: hyper-local, apartment-specific surge pricing) seems to have regulators on edge, as RealPage found its property management solution in the crosshairs of the Department of Justice after accusations surfaced that it used its pricing software to artificially increase apartment rents across a number of U.S. cities.
“A free market requires that landlords compete on the merits, not coordinate pricing,” the DOJ said upon the case’s initiation. RealPage managed to prove its algorithms were on the right side of consumers, as the DOJ dropped the charges this month.
Yardi’s RentMaximizer (now called Revenue IQ) was been put on notice, too. Unlike RealPage, Reuters reported on December 5 that Yardi’s case is progressing while legislators in California are trying to pass laws that restrict the role of AI in determining market dynamics.
It doesn’t look like regulators will drop the issue any time soon.
Lofty, a provider of software for brokerage marketing, operations and CRM, stepped into property management this year when it announced at Inman Connect Las Vegas the rollout of LoftyWorks. This move could give it an early advantage over competitors Lone Wolf, Inside Real Estate and MoxiWorks, who are likely eyeing landlords in 2025.
RentSpree continued its years-long push into the country’s multiple listing services to help agents capture renters before they become buyers, and firms like Doorloop, RentRedi, Blanket, RentalBeast, AppFolio and others continue to advance their modern, mobile and flexible applications for small and large landlords alike, making everything easier for investors and giving property managers more ways to keep tenants in place and their clients profitable.
Chatbot-heavy EliseAI, formerly MeetElise, was early to integrate machine learning and AI with property management, launching in 2017. The company told TechCrunch this year that its bots “boost lease tour bookings by 125 percent while decreasing overdue payments by 50 percent,” on average.
The company’s foresight resulted in its fourth VC haul, a $75 million Series D funding round that closed this summer around the same time tenant screening technology startup Findigs closed its $27 million Series B.
Other software providers turned their eyes on the build-to-rent space in 2024, now an entirely new real estate asset class. It’s a vertical that has savvy proptechs salivating.
Arbor Realty Trust said in a Dec. 4 report that “build-to-rent and single-family housing starts totaled 92,000 units over the year ending in the third quarter of 2024 — an all-time high.”
Industry tech giant Yardi adjusted its product line to accommodate SFRs and Avenue One is making the most of a $100 million round it closed in 2023 to build its SFR lending and development strategy firm.
The portal war for 2nd place
Virtual staging and immersive listing tech essentially stayed the course in 2024. Not having any property to help sell is largely why, but that didn’t stop Matterport from catching the eye of CoStar.
The digital twin leader was acquired by the Homes.com parent in April for $1.6 billion. There’s potential for this to be a significant development for the still-emerging marketing tactic that is 3D property capture. London-based Giraffe 360 and Canada’s iGuide continue to earn their respective shares of the digital twin space, too.
Still, is Zillow concerned about Homes.com’s attempts to gain portal dominance? Not likely, regardless of how many opportunities Andy Florance finds to take the debate to the mainstream. The leader in online search isn’t taking the bait; it’s simply too busy winning.
CoStar kicked off 2024 with a celebrity-infused Super Bowl ad blitz that marked the start of a well publicized $1 billion advertising effort. The collective appeal of Daniel Levy and Heidi Gardner managed to move the needle, but it hasn’t redlined the brand.
Network-wide, meaning Homes Network, the Apartments Network and the Land Network, the company reached 130 million average monthly unique visitors in Q3. Homes.com itself reached 85 million average monthly unique. Both metrics are down from last quarter, but up from last year.
In July, the National Advertising Division (NAD), an arm of the Better Business Bureau’s National Programs, did its part to keep Homes.com from finding the current when it recommended the portal giant halt the use of two key traffic claims in its advertising due to a challenge filed by Realtor.com parent company, Move, Inc.
Move challenged Homes.com’s claims that it has reached 156 million unique monthly visitors on its site and has double the unique monthly visitors of Realtor.com.
The spat between the two tallest short people boiled over again in November when NAD rejected CoStar’s tantrum against Realtor.com’s “No. 1 site real estate professionals trust” advertising tagline, Inman reported.
The Virginia-based commercial behemoth challenged the tagline, which is based on an August 2023 double-blind survey of over 1,300 real estate professionals, for being outdated and failing to reflect the current sentiments of real estate professionals. Although NAD ruled in Move’s favor, the Division urged the portal to conduct a new survey as the validity of the August 2023 results won’t “last in perpetuity.”
There’s no sign that Homes.com’s incessant need to be first in homebuyer traffic will cease come 2025, and the industry will continue to roll its eyes as Florance treads water in Zillow’s wake.
Meanwhile, Zillow pushed on with super app effort to provide agents with much more than buyer leads, like state-specific touring agreements. It’s a small thing but demonstrates how as a portal it’s offering benefits to the industry instead of worrying about how many people visit its website. It also twice hooked up with Realtor.com, once to syndicate virtual tours and a second time for its rental listings feed.
Zillow even got tacit approval from the leader of the Clear Cooperation rebellion, Compass CEO Robert Reffkin, to become “the national MLS.”
“My view is that Zillow is going to be the MLS,” Reffkin said at NAR’s annual conference. “It’s just a matter of time.”
Odds and ends
A few vendors tried to assemble stand-alone solutions to address the buyer representation agreement standard that came about this year as a result of the National Association of Realtors commission lawsuit settlement. None found any measurable traction. Instead, the process remains fragmented and, to little surprise and in true NAR fashion, without any effort to become standardized. Inman stopped updating a running list in June.
There was movement in the agent benefits sector as Tongo and Upfront launched to offer hassle-free financing resources for agents, something Real Brokeage is rolling out to its sales professionals, too. This will be something to watch in 2025, as fintech trends and the decentralized finance movement continue to gain traction in real estate.
Big software players like the aforementioned Inside Real Estate, Lofty, MoxiWorks, Lone Wolf Technologies and others appeared to focus inward, using market sluggishness as an opportunity for updates, rebrands and leadership moves.
The recruiting and retention application Courted finally got its day in front of an industry jury, winning an Inman Innovator Award, among others. If this firm isn’t acquired by the end of 2025, it won’t be due to a lack of suitors.
Inspectify remains on its mission to keep home inspections important parts of the deal. It introduced an item-by-item insurance add-on to reduce buyer anxiety about major home systems. Inspections are good at making buyers afraid. This could also reduce the cumbersome experience of home warranties, which are irresponsibly heaved at buyers by sellers as some sort of salve for the future pain of owning a home.
Courted and Inspectify, two of several examples, represent the best kind of change for residential real estate—a rethinking of “how it was always done.” Courted is making brokers think about and prove why they hire who they do while Inspectify wants to show the industry that inspections should be standardized, or at least made much, much smarter.
Other sectors staying the course or outright fading from the spotlight in 2024 include pre-list renovation companies — Curbio got sued — showing schedulers, open house marketing, video creation apps and listing image enhancement.
Invention requires necessity, and 2024’s lack of sales activity resulted in few problems to solve. This past year was like a prolonged airport layover. After the consternation ebbs, you start thinking about what can be done to pass the time.
Let’s hope 2025 provides enough runway for takeoff.
